The Leahy-Smith America Invents Act (AIA) was signed into law in September of 2011, and has had quite the impact on intellectual property (IP) valuation and patent filing in the months since. According to a White House press release, the AIA represents “the most significant reform of the Patent Act since 1952.”

Purpose of the AIA

The goal of the America Invents Act is to encourage innovation, allow entrepreneurs and inventors to patent their inventions as quickly as possible, provide clarity surrounding patent rights, and help resolve conflicts associated with inventors who file for the same invention.

First to File vs. First to Invent

One of the biggest impacts of this Act is that, today, the first person to file for a patent holds the property rights to the invention, rather than the first person to invent (the latter was the focus in previous years). There is a derivation proceeding that must be followed to ensure the person filing is the original inventor and that they did not steal the invention from another person.

In addition, the act allows for “a fast track option to patent processing” (cutting the wait time from three years to less than 12 months), increased patent quality, and more opportunities for patent holders to protect their IP in other countries.

So what do these changes mean for IP valuation today?

The America Invents Act and IP Valuation

While the full effects of the Act have yet to be realized, there seems to be a few positives and drawbacks for small businesses and inventors. While the patent process will likely be much quicker, one publication notes that “smaller companies and startups will need to begin filing earlier to secure a priority date, and so will have to invest in prosecution at an earlier phase.” In other words, because the rights will be awarded to the original filer, inventors now have incentive to file as early as possible or risk having to prove their right to the property through derivation proceedings.

Valuing Intellectual Property

Working with a valuation company, like Appraisal Economics, is the best way to determine the value of your patent or company. In addition, if your company is planning a merger or acquisition of another firm, understanding the value of intellectual property is essential to the bottom line. Valuation is especially important for technology companies or for technological products and patents.

There are several methods in which a valuation firm will determine the value of IP. Cost-based valuation will include the cost to create the assets and how much it will be recreated for in the current economic condition. The market-based valuation will determine the cost based on the sale or purchase of similar assets.  The income-based valuation will include all the previous and future earnings for the asset.

Working with Valuation Firms

Since it is challenging to come up with the right information, it is wise to hire a valuation firm. The firm will be able to provide clear identification of the IP, legal rights and restrictions, earnings capacity, and the correct market value of the IP.